Mnuchin said in the discussions he had with the Chinese they had made clear that they did not see a further weakening of the Chinese yuan as being in their interests. Many investors believe "rates have to go up because the economy is good, and the Treasury is issuing a lot more debt", said Roberto Perli, an analyst at Cornerstone Macro. The higher the discount rate, the more expensive it is for the bank to borrow, and therefore, the higher the rate will be when the bank loans money to a business or to an individual to make a larger purchase such as a vehicle or a house.

The president has been publicly criticizing the central bank since July for interest-rate increases and declared he was "not happy" in September after the third rate hike of the year. But it remains low historically: It averaged 4% over the 1990s and 2000s. The nasty truth is that higher lending rates from the Fed is like adding a discriminatory tariff or tax on USA citizens.

The yield on 10-year U.S. Treasury bonds reached a seven-year high this week of 3.25 percent (it receded some Wednesday as stocks dropped), up from 2.82 percent in August.

He went on: "I put $250bn worth of taxes, or tariffs, on China and it's had a big impact".

In recent memory, no president has been so openly critical of the central bank.

Mr Summers cautioned Mr Trump against criticising the Fed, saying it might have the opposite effect.

Trump was briefed on the market turmoil earlier in the day, a White House official said. The Fed is in business to do what it thinks is right, not necessarily what the people in power want it to do.

The breach of norms is not surprising for a real-estate-developer and reality-star-turned-president who has cheered as Wall Street has soared to new heights this year, hitting repeated records, and used that as proof his economic policies were working. Housing has already shown softness in some markets in recent months.

For now, inflation doesn't appear to be a problem.

Bond yields, which have spiked over the last week, slid after the Labor Department said consumer prices grew only slightly in September. Core prices, which exclude the volatile food and energy categories, were up 2.2%, the same rate as in August. Investors might, for example, question whether the Fed would feel free to keep raising rates, if it felt it necessary to control inflation.

The Federal Reserve has repeatedly pledged to raise rates only gradually. "I think what they're doing is wrong".

It's the latest sign that markets may be struggling to adjust to a new era, where returns are no longer juiced by the ultra-low rates that prevailed in the years following the Great Recession.

But as the economy began to post solid and consistent growth following the global financial crisis of 2008, and prices began to creep higher, the central bank was anxious to return to a more normal policy.

The unemployment rate in September dipped to 3.7 percent, a level not seen in almost half a century, while an inflation report on Thursday indicated the pace of price increases remained under control around the Fed's target.

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